Industries that have obsessed on the needs and desires of millennials are starting to turn their attention to the next generation, and restaurants and food businesses are no exceptions. Gen Z, those born after 1996, make up 26% of the population now and their presence is expected to grow to 40% by 2020, said Marisa Allan, vice president of partner innovation at Unidays. The UK-based student affinity network, which has grown to about 5 million US members since opening its New York office three years ago, recently launched a restaurant division.

“There’s a really big opportunity now because of their life stage. They’re a population that’s extremely connected on social and digital channels,” she said. “They’re moving to new cities, making new friends and experiencing new cultures and foods. They’re forming habits now and making adult decisions for the first time. They’re making memories that will stay for a lifetime.”

Gen Z commands about $828 billion in spending power, and much of the group’s spending goes toward food, according to a Unidays survey of 1,800 college students last summer.

“What we’re starting to see is they’re spending more on food than predecessors and being more frugal elsewhere,” Allan said.

Almost half of the students surveyed spend between $10 and $20 on a restaurant order and 15% drop upwards of $20, according to the report titled “Gen Z: What Restaurants Need to Know.”

The group is the first to grow up as digital natives, raised with phones in their hands that give them a long geographical reach when it comes to influencing and being influenced by their peers, Allan said.

“They’re willing to pay attention, but looking for brands to teach them something or provide a resource, make them laugh or give them something of value.”

They’re also looking for food that fits in with their values, according to a separate report by NPD Group. The group was raised in a culture that’s often focused on food and the importance of nutrition and, in addition to transparent labeling and shorter ingredient lists, they’re also looking for experiences.

“Gen Z’s will be a seismic force for the food industry as they emerge into adulthood under more prosperous economic circumstances, yet with their own differentiating set of values,” NPD’s David Portalatin said in a news release.

Health and nutrition also emerged as a key value in the Unidays study. About 41% of Gen Z members surveyed said they’re willing to pay a premium for healthier food, compared to 32% of millennials, Unidays’ Allan said.

“For previous generations sustainability, organic, locally sourced ingredients, those weren’t part of the conversation. With this audience, those key issues are top of mind and it’s important to talk about them.”

Currently, members of Gen Z spend less on groceries than their Gen X and Gen Y counterparts, but that’s poised to change as they age, and their influence will grow along with their spending. Demand from Gen Z is expected to drive the development of packaged foods that reflect their racial and cultural diversity, according to research from marketing firm Acosta.

Which offers will get Gen Z through the door?

In addition to moving past the idea that Gen Z doesn’t have the money to spend on food, food brands and restaurants should keep some other things in mind when marketing to the youngest consumers, according to the Unidays report.

The group has raised ignoring traditional advertising to an art form. Just 8% learn about new menu items from TV and 4% from display advertising, the survey found, while around 41% find out about new foods while in the restaurant. Word-of-mouth is also key – 20% hear about new items from social media and 19% from friends. All that said, 93% said they’re driven by discounts to try new restaurants.

Community-based offers to groups that Gen Z members are likely to be a part of are key when marketing to this group, the report says, starting with student discounts. About 48% of college students don’t have campus meal plans and 78% take advantage of student deals offered by local and independent eateries.

“Student discounts or special offers are a powerful way to make a splash and give back to students by investing in them and their future,” Allan said. “When we talk to businesses we learn so much about their challenges to margins, so if you understand the needs of the business you can align a student discount that meets that objective.”

For example, if a restaurant has slower traffic at night, it could offer special promotions after 8 p.m., which would appeal to the 80% of students surveyed who said they would eat at off peak times if there was a discount.

“There are a lot of different ways [restaurants] could create programs that are a win-win,” she said. “When it comes to loyalty and repeat business, the hardest part is getting them into the restaurants and tasting the food. If you can create compelling offers and tell the story of the brand, that gets them on track to become loyal customers.”

Pretty pictures and impulse buys

Gen Z members are also spontaneous – only 5% plan their meals in advance and 48% try a new quickservice eatery each month, according to the survey. Mobile offers and promotions that reach students when they’re likely to be hungry can be effective in wooing spur-of-the-moment diners.

The generation is also accustomed to communicating in images, so restaurants and food brands would do well to include food pictures and videos in their social media marketing and promotional offers to Gen Z, the study says.

Of course the food has to live up to the pictures.

“At the end of the day, nothing’s going to replace a great-tasting product,” Allan said. “You can have the most viral social campaign but if your menu items aren’t what they want, it doesn’t matter. [It’s driving the] emergence of this new category of fine casual. You can walk over to Madison Square Park and I wouldn’t be surprised if one out of every four people on line are Gen Z.”

__________________________________________________

If you enjoyed this article, join SmartBrief's email list for more stories about the food and beverage industry. We offer 20 newsletters covering the industry from restaurants to food manufacturing. And be sure to follow us on Twitter for the latest industry news.